The Reverse Mortgage Blog - by Dennis Haber Esq.

Reverse Mortgages Are Not A Fund Raising Tool For The Government

Noted author,Peter Miller makes an interesting obsevation in his BESTREVERSE MORTGAGE blog.

Sometimes Clients Make The Best Salespeople

The following represents a composite of my clients. I have found that some clients, who have done their home work, need little or no assistance in understanding why a reverse mortgage would work for them.

A wry smile comes to my face when I suggest that maybe the client has not looked at all the facts; or perhaps there is another solution; or perhaps the client is going too fast to soon after the realization hits that a reverse mortgage is the answer. When I ask, “Who have you spoken to about this”? and What have they said to you”?  the latter answers belie what the clients already know to be true.

Quite often a particular client will approach a family member or a close friend about their recent or pending decision. I think some do this out of amusement-just to see, and I think, to test how ignorant these fledging “experts” can be. When I hear these stories I always counsel my clients that they need to remember what Will Rogers once said, “Everyone is ignorant. Just on different subjects”.  These clients tell me that they are told, “Watch Out”! “You will lose your home”; or “A reverse mortgage is only for the poor;”, or “It is just too darn expensive”, or “You need to be in good health”; or “You can be kicked out at any time”; or monthly mortgage payments have to be made….who ever heard of a mortgage where you do not have to make such payments”. And so forth and so on.

The thing that is bothersome is that not every reverse mortgage borrower has this self-assurance.
Many need to be told that you will not lose your home because you obtained a reverse mortgage;
Many need to hear that reverse mortgages are not for the poor. Seniors in every income bracket have attained one. There is no stigma attached to converting equity into cash.
Many need to hear that while a reverse mortgage has many costs, only the borrower can determine what it is worth to them. Some believe that it is just too darn expensive. Others believe that in spite of its costs, it is the best deal around.
Many need to hear that “health” has no bearing upon whether one can obtain a reverse mortgage. In fact, challenging health issues are a reason that many seek out this program. The reverse mortgage proceeds helps seniors stay in their homes/
Many need to hear that contrary to what gets repeated, a reverse mortgage borrower is never obligated to make monthly mortgage payments.

There is no substitute for asking questions. Questions are indeed the fuel that will insure that you get answers and will help you arrive at a sound determination.

HOW TO CULTIVATE MORE SENIOR CLIENTS

Answers to a senior client’s probing questions usually evince retorts that contain the below mentioned concerns:

I really want to know that my money problems will go away; that I can fully and completely trust the individual that is helping me; and I understand the reverse mortgage concepts.

So the question becomes how I move the client from here (full of uncertainty) to
There? (Peace of mind)

When working with seniors, it is key to keep three things in mind: Number 1.
The senior client must like you.  Number 2. You need to understand the issue(s) from the client’s point of view; Number 3. You need to take the fear out of the equation.

Accomplish 1, 2 & 3 and you will have more clients than you can handle.  That is why it is important to be sincere. A senior, with their wealth of human experience, can spot a phony a mile away. Stop talking. Take a moment to listen to what the prospective client is trying to say to you.

It is a well known axiom of sales that people tend to do business with people that they like. So step one is to build a rapport with your prospective client. I am not speaking about insincere motives. Rather, you must genuinely be interested in the client.
The significance of his cannot be understated.  People also tend to trust people they like.

Step 2 requires that you have taken the time to study and learn about the issues our elders are facing. Accordingly you will need to know about: Aging trends in this country; Care giving needs of seniors; Illnesses that affect activities of daily living; Chronic illnesses common to an aging population; Long term care issues; Social Security program; Medicare & Medicaid programs; Advance directives and have professional resources available. By the way, I am assuming that you know everything about the reverse mortgage program.

Step 3 requires that you deal with the complexity of the program. The reverse mortgage program, like other mortgage and financial programs uses a lexicon that has no meaning to the uninitiated. One of the ways that you can take the fear out of the process is to convert reverse mortgage argot to easy to understand words. For Example, “Maximum Claim Amount” and “FHA Lending Limit” become “The Magic Number”. “Principal Limit” becomes the Benefit Amount”. “Service Set Aside” becomes the “Reduction Amount”. 

Because of its complexity, reverse mortgages are hard to sell.
The point to remember is that creativity could be the tool that makes “difficult” “easy”.

Dennis Haber addresses merits of reverse mortgages

In this past Saturdays (5/10/08) Newsday I was interviewed in the Ask The Expert Column, by Karen E Klein. Here is an excerpt:

The problem: My parents have lived in their home 36 years and own it outright. My mom is ill and does not work. My dad, 71, wants to get a reverse mortgage. Is this bad timing with the housing market down?

The expert: Dennis Haber, attorney at law, Jericho.

The rules: Reverse mortgage benefits are determined by the home's value (up to a limit), the borrowers' age and the expected interest rates. FHA/HECM reverse mortgage programs have two interest rates: The "note rate," which determines the repayment amount when the reverse mortgage becomes due; and the "FHA expected interest rate," which partially determines how much money you get from a reverse mortgage. The note rate is currently around 3 percent and the expected rate is also low, meaning higher benefits to borrowers.

Click on the link for the full article.

Reverse Mortgages-360 degrees (almost)

When I got into this business 6 years ago, there was one proprietary program (private brand) and three standard programs. These included the government insured HECM, which came in two varieties: The monthly adjustable (margin of 150 basis points) and the annual adjustable (margin of 210 basis points). And there was Fannie Mae’s Home Keeper program. That was it.

Two Thousand Six was a seminal year. The HECM 100 (margin of 100 basis points) and the Fixed rate HECM were introduced.  Reverse mortgages were poised to jump into the mainstream. Additional  programs with even lower  margins were introduced. The industry proudly boasted that there were 22 different programs.

The Department of Housing & Urban Renewal (HUD) approved of the alternative LIBOR (London Interbank Offered Rate) index. The LIBOR index is the language of Wall Street and the worldwide investing community. Ginnie Mae was set to securitize these loans as well. Foreign investors love to purchase Ginnie Mae certificates.

And then the Alta-a and sub prime debacle happened. Wall Street lost its appetite for any type of mortgage back securities. Programs were withdrawn from the drawing board and from the market place. Programs with margins lower than the HECM 100 were scrapped. Proprietary programs started to vanish. Many such programs reduced their benefit amounts as community after community were deemed to be in a declining housing market.

The available reverse mortgage programs, with a few exceptions, resemble the mix of programs that existed at the end of 2005.

In spite of the paucity of programs, the number of seniors obtaining reverse mortgages has climbed steadily. Of all the reverse mortgages that have closed since 1990, 92% have closed since 2000. Astonishingly, 60% have closed in the past 28 months.